Airbus fights back under dark skies

Victoria Bryan, Andrea Shalal-Esa

6 Min Read

A model of an Airbus A350 passenger plane is displayed at a news conference in Hong Kong, March 7, 2011. REUTERS/Bobby Yip

FARNBOROUGH, England (Reuters) - Airbus has won a potential $4.2 billion order for its A350 passenger jet, its first major deal at a subdued Farnborough Airshow, where a faltering global economy is casting clouds as dark as the skies over southern Britain.

The deal announced on Tuesday with Hong Kong airline Cathay Pacific is a major boost for the European planemaker, which has been struggling to sell its A350-1000 “mini-jumbo” and make a dent in Boeing’s hold on the lucrative corner of the passenger jet market, just below 400 seats.

Boeing itself announced a provisional deal to sell 100 next-generation narrowbody 737 airliners to leasing firm GECAS. They are worth around $9.3 billion at list prices.

That was the U.S. group’s second big deal for the revamped plane in as many days, bolstering its fightback against Airbus’s A320neo in the top-selling short-haul segment of the market.

Both deals, however, were well flagged in advance of the show, where there have so far been no major surprises.

The event “really has been pretty quiet,” said Scott Donnelly, chairman and chief executive officer of Textron Inc, the U.S. manufacturer of Bell and Cessna aircraft. He told Reuters: “It’s certainly one of the quieter Farnboroughs.”

Boeing and Airbus, which battle for the bulk of a jet market estimated at $100 billion a year, played down expectations ahead of the aerospace industry’s showcase gathering, arguing their order books were already bulging.

Airbus sales chief John Leahy was in typically combative and upbeat form: ”The party’s over?. Why, it’s only the second day of the show, for heavens’ sake,“ he said of suggestions orders were drying up. ”We’ll have some important announcements.

“The order rate has to slow down at some point,” he told Reuters Insider TV. “We’re looking at six to seven years worth of production running flat out if we don’t sell anything for the next six or seven years.”

However, some analysts say the euro zone debt crisis and slowing economic growth in China could see existing orders delayed or cancelled, and that some recent deals suggest Airbus and Boeing are heading into a price war.

“We can’t see how it could be a very successful airshow this year,” Cheuvreux analysts said in a research note, predicting the Farnborough week will produce a combined 300-400 orders for Airbus and Boeing, less than half the number at the equivalent annual show at Paris last year.

ATTACK, THE BEST FORM OF DEFENCE

Defense firms are braced for even tougher times as governments on both sides of the Atlantic rein in spending to reduce their debts, although they expect demand from Asia and the Middle East to ease the pain.

“We’re anticipating that the defense budget downturn in both the United States and Europe is a longer-term downturn, so we expect that to be a relatively flat market for us over the next decade,” Dennis Muilenburg, chief executive of Boeing’s defense division, told Reuters Insider TV.

Marillyn Hewson, who will take over as president and chief operating officer of Lockheed Martin Corp, agreed the outlook was challenging at home, but saw opportunities in areas like unmanned systems and cybersecurity.

“It’s an unpredictable world that we’re in. We don’t know what’s going to happen with global security,” she told Reuters.

ALL SHAPES AND SIZES

Airbus, owned by European aerospace giant EADS, said Cathay Pacific planned to buy 10 new A350-1000 aircraft, worth around $3.2 billion at list prices. It also converted an existing order for 16 A350-900 jets to the larger model, adding a further $1 billion to the possible new income from the say’s signing.

The carbon-composite A350 spans two of the accepted categories of airliner, aiming to challenge the Boeing 787 Dreamliner as well as the U.S. company’s most profitable plane, the 777 mini-jumbo.

Boeing, meanwhile, said GECAS had committed to buy 75 of its 737 MAX 8 planes as well as 25 of its next-generation 737-800.

That deal leaves Boeing well ahead of Airbus in terms of orders at the rain-soaked airshow.

The GECAS deal was widely anticipated. The leasing firm’s parent company General Electric has a joint venture with France’s Safran to produce the LEAP engines that will power the 737 MAX.

Earlier in the day, Boeing unveiled long-awaited details on the payload and range of the 737 MAX, arguing it would fly farther and offer more revenue potential than both its predecessor and its main competitor.

“We did come a little bit late to the party, but the acceptance of this product is overwhelming. Customers really like what they see,” Randy Tinseth, vice president of marketing at Boeing Commercial Airplanes told Reuters Insider TV.

Like Airbus’s Leahy, he was optimistic demand would hold up.

“There’s no question here in Europe, the airlines have been suffering. At the same time, we do see markets that are successful,” he said. “But the goods news is: traffic is growing and airlines as a whole this year should be profitable.”